Carnival shares rise despite pause in China

By Jjohn Konrad (gCaptain) Shares in Carnival Corporation, parent company of Carnival Cruise Lines $CCL, are up nearly 10% today in what the CEO calls a “phenomenal season.” This increase follows a robust Earnings report for the second quarterwhere the company posted sales of $4.91 billion, beating the consensus estimate of $4.77 billion, though there were no plans to return to China.

Analysts from Wells Fargo and Susquehanna have answered raising their price targets for Carnival to $15 and $17, respectively, while Morgan Stanley raised its target to $11.5. Citigroup maintained its price target of $18. Other cruise line stocks including Norwegian Cruise Line, Royal Caribbean Cruises and Lindblad Expeditions are also seeing a positive trading day.

CCL Yahoo stock chart
Carnival Cruise Lines $CCL Yahoo stock chart

Meanwhile earnings announcement of the weekCEO Josh Weinstein expressed optimism despite the heavy debt taken on during the pandemic. He stressed that the company reached a significant turning point in revenue and bookings in the second quarter of this year.

“We have reached a significant inflection point for sales and net margin exceeded strong 2019 levels,” he said called. “In addition, operating income, cash flow from operations and adjusted free cash flow were all positive. Adding to these successes, we just hit an all-time high in bookings and customer deposits.”

Weinstein also expects bookings to continue to gain momentum. “We’re still going through a phenomenal season that started early, picked up strength and is still going strong going into mid-year,” he said.

The CEO also addressed the company’s position on China. He explained that while they’re excited about China’s full opening up to international travel, Carnival has no plans to participate when it does.

“No, these numbers don’t suggest we’re going back to China,” Weinstein said. “We’re very excited about China’s opening up to international cruise line travel and think it’s a great thing for the industry, but the fact of the matter is that we’re likely to remain on the sidelines of this[market]for a few more years.”

Weinstein also introduced the SEA Change program, a three-year goal designed to demonstrate the company’s progress towards strong profitability and sustainability. The acronym SEA stands for Sustainability through Reducing Carbon Intensity, EBITDA per ALBD and Adjusted ROIC, three very important performance indicators.

For sustainability reasons, the company plans to reduce its carbon intensity by more than 20% compared to 2019. For EBITDA per ALBD, the company is targeting a 50% increase compared to its 2023 guidance. This would also represent a 25% increase from 2019 levels if the fuel price and currency remain constant. They expect adjusted ROIC to hit 12%, more than doubling from 2023 levels.

That strong performance and the CEO’s upbeat outlook has clearly resonated with analysts and investors (at least in the short term) and has led to a surge in Carnival Corporation’s share price. As the company continues to move through the post-pandemic landscape, it will be interesting to see if the market continues to reward its efforts.

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